Term vs. Fixed Life Insurance

by Neil Kokemuller ; Updated July 27, 2017
The certainty of a benefit payout contributes to the higher premiums for whole life.

Term life insurance is a defined policy that guarantees a benefit payout if the covered person dies during the policy term. Fixed life is another label for whole life, which combines life insurance and savings into one account.

Term Life Basics

The primary purpose of a term life plan is to provide financial protection for your surviving family if you die prematurely. Common term lengths on this type of policy are 10 years and 20 years, according to Fidelity. If you get a 20-year life plan, your beneficiaries get the defined benefit if you die during that period. A major difference with term relative to fixed coverage is that there is no benefit payout after the term expires.

Fixed Life Basics

Whole life is a "fixed" policy because your premiums remain constant throughout the entirety of coverage. In contrast, more flexible universal life policies allow for premium adjustments over time. Whole life plans are intended as a way to transfer tax-deferred wealth to surviving beneficiaries. Premiums for fixed life plans are higher than with term, Fidelity reports, because of the combined life and savings benefits. There is also a guaranteed benefit payout with whole life because of the cash savings balance.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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